NTN Corporation
Q1 Financial Results Briefing for the Fiscal Year Ending March 2024
August 2, 2023

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

6472-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Q1 Financial Results Briefing for the Fiscal Year Ending March 2024

[Fiscal Period]

FY2024 Q1[Date]

August 2, 2023

[Number of Pages]

28[Time]

17:00 – 18:02(Total: 62 minutes, Presentation: 27 minutes, Q&A: 35 minutes)[Venue]Webcast[Venue Size][Participants][Number of Speakers]

4
Eiichi Ukai
Hideaki Miyazawa

Masaaki Yamamoto
Tatsuo Nagao

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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
Corporate Strategy Division, Public Relations& IR

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Presentation
Nagao: We will now begin NTN Corporation's Q1 financial results briefing for the fiscal year ending March
2024. Thank you very much for taking time out of your busy schedule to participate in our financial results
briefing today.
First, I would like to introduce today's attendees.
Mr. Ukai, Representative Executive Officer, President, and CEO.
Ukai: I'm Ukai. Thank you.
Nagao: Mr. Yamamoto, Executive Officer and CFO.
Yamamoto: I'm Yamamoto. Thank you.
Nagao: Mr. Miyazawa, Executive Officer, Corporate General Manager of Automotive Business Headquarters.
Miyazawa: I'm Miyazawa. Thank you.
Nagao: I'm Nagao from Corporate Strategy Division, and I will be the moderator. Thank you.
Today's briefing will follow the briefing materials distributed to your registered email address. The documents
are also available on our website, so please check our website if you do not have them.
Today, President Ukai will first explain the highlights of the financial results, and then Mr. Yamamoto, CFO,
will explain the results for Q1 of the fiscal year ending March 31, 2024 and the outlook for the full fiscal year.
After that, Mr. Miyazawa, General Manager of the Automotive Business Headquarters, will give an
explanation of the initiatives of the automotive business, followed by a question-and-answer session. The
briefing is scheduled to end at approximately 6:00 PM.
Now, President Ukai, please begin.
Ukai: I'm Ukai from NTN. Thank you very much for taking time out of your busy schedule to participate in our
financial results briefing today. We would also like to take this opportunity to thank our shareholders andanalysts for their continued support.
CFO Yamamoto and General Manager Miyazawa of the Automotive Business Division will explain the financial
results, earnings forecast, and profit increase and decrease analysis in detail.

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Please refer to page two.
Net sales were JPY200.8 billion, operation profit was JPY1.5 billion, and they both increased YoY.
In the aftermarket business, sales were JPY35.5 billion, an increase of JPY3.1 billion YoY, due to strong salesin Europe, China, and Asia, the promotion of price pass-through, and the impact of foreign exchange rates,and operation profit was JPY4.8 billion, an increase of JPY0.2 billion YoY.
Sales of the industrial machinery business decreased by JPY1.2 billion YoY to JPY32.9 billion, and operating
income decreased by JPY0.4 billion YoY to JPY0.9 billion due to decreased demand for agricultural machinery,
construction machinery, and wind power generation mainly in the Americas.
In the automotive business, demand recovered in all regions due to the recovery of demand from thelockdown in urban areas of China and the easing of semiconductor supply shortages, resulting in net sales of
JPY132.4 billion, an increase of JPY26.3 billion YoY. As for operating profit, it increased by JPY2.5 billion YoY
due to the promotion of selling price pass-through, the impact of foreign exchange rates, and other factors,
but we recorded an operating loss of JPY4.1 billion.
Regarding our distributor, Horimasa Co., Ltd., we apologize for any concerns or inconvenience this may havecaused to end users. We have already recorded a loss of approximately JPY700 million due to this bankruptcy.
For the current fiscal year, we have revised our sales forecast to JPY825 billion, taking into account the positive
JPY33 billion impact of foreign exchange rates due to the recent depreciation of the yen and the negative
JPY18-billion decrease in sales due to the risk of market slowdown caused by the economic recession and theSupportJapan
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sluggish performance of Japanese automobile manufacturers in Europe and China, where the EV shift is
progressing.
Operating profit will remain unchanged at JPY30 billion, as the decrease in sales will be offset by the impactof foreign exchange rates and a review of costs and other factors.
That's all from me.
Now, Mr. Yamamoto and Mr. Miyazawa will continue to explain the details of our business performance.

Yamamoto: I'm Yamamoto. I will begin my explanation on page three of the slides.
First of all, in terms of consolidated key indicators, as just mentioned by Mr. Ukai, Q1 closed with net sales of
JPY200.8 billion, an operating profit of JPY1.5 billion, and a net profit of 1.6 billion.
As a result of revising the exchange rate to JPY135 to the US dollar and JPY150 to the euro from Q2 onward,
the profit in the forecast for the full year remains unchanged from the previous announcement, with net salesof JPY825 billion, an operating profit of JPY30 billion, and a net profit of JPY11 billion.
The key point here is, excluding exchange rate in column 2-1 of the YoY comparison. Despite a JPY19.9 billion
increase in sales, operating profit was a negative JPY0.7 billion. And, although we changed the sales, we did
not change the operating profit. I will explain more about this later.

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Please move on to page four.
This is the waterfall chart from the operating profit of negative JPY800 million from the same period last year
to the current JPY1.5 billion.
The second item from the left shows a plus of JPY7.6 billion at the selling price level. I mentioned earlier thatsales increased by JPY19.9 billion, so if we subtract this JPY7.6 billion from the sales price level, we get JPY12.3
billion in terms of scale. This is the increase in the sales volume YoY. Despite this, it was minus JPY1.2 billion
due to the scale.
First, let me explain this section.
In the same period last year, we raised production considerably and increased inventories. In the current fiscal
year, we have considerably reduced production since the end of the previous fiscal year, and although thevolume of goods sold increased by JPY12.3 billion, production was slightly down YoY. The impact of scale isslightly more than JPY2 billion.
On the other hand, the inventory valuation impact is negative YoY since the price of raw materials increased
quickly in the same period of the previous year. This is about JPY2.6 billion, so the impact of scale has been anegative number.
In addition, we are currently closing operations in Brazil and other countries, and the deterioration in loss
there is also included in the scale.

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5Due to such events, the scale effect and other factors are in the negative JPY1.2 billion.
As Mr. Ukai explained earlier, the increase of JPY100 million was due to the addition of JPY700 million in bad
debts from Horimasa, which otherwise would have resulted in an increase of about JPY800 million.
The rest is plus JPY3 billion of foreign exchange impact.
In terms of proportional costs, there was a cost reduction of JPY2 billion and a cost increase of JPY8.2 billion,
and the cost increase is greatly affected by components and electrical gas rather than steel products.
The last item is the minus JPY1 billion in personnel expenses, which is mainly due to base increases in Japanand an increase in personnel expenses in the United States.

Please continue on to page five.
This is the waterfall chart from the JPY30 billion announced last time to the same amount this time.
The second item from the right is the decrease of JPY10.3 billion in scale and other factors.
Then, the selling price level is plus JPY1.2 billion.
I mentioned earlier that sales will decrease by about JPY18 billion, but excluding the impact of selling prices,
sales will decrease by a little more than JPY19 billion in volume. In particular, since sales in China are expected
to decrease by approximately JPY12 billion, we expect a decrease of JPY10.3 billion in profit due to the scale.
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As for the increase in profit, we have reviewed the exchange rate, and it is plus JPY3.1 billion.
The selling price I mentioned earlier is plus JPY1.2 billion, mainly for automobiles, which we will take up to theend.
Regarding proportional expenses, the current amount is plus JPY1.7 billion, including the fact that it may besomewhat less than originally expected.
As for expenses and personnel costs, since the scale will decrease, we will naturally cut back on these costs.
Also, in Q1, we have been able to reduce expenses and personnel costs considerably in Japan, China, andother areas, so based on that, we expect JPY2 billion and JPY2.3 billion as a factor in the increase in profit.

Please continue on to page six.
This page shows the waterfall chart from the H1 forecast of JPY6.5 billion to the H2 forecast of JPY23.5 billion.
In H2, sales and production will increase by approximately JPY15 billion to JPY16 billion in the scale comparedto H1, which is an increase of JPY6.8 billion in sales volume.
The selling price is the same as in the previous fiscal year, but the effect of the price increase is higher in H2,
and it will be JPY4.8 billion from H1 to H2.

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Also, regarding the proportional costs, the price of steel materials, etc., will probably fall from around October.
The effect of the lower raw material prices is also expected to be plus JPY3.1 billion, as the amount of effectwill be larger in H2.
As for expenses, as I mentioned earlier, we have about JPY700 million in allowance for doubtful accounts in
H1. In H2, this will naturally disappear. In addition, shipping fees to North America have been revised andlowered since around May, and we estimate the impact of this on our monthly freight rates to be about JPY800
million. Those two will bring the total to JPY1.5. As for the remaining JPY700 million, we are now also
thoroughly reducing costs, which will be a reduction of JPY700 million towards H2.
For foreign exchange, we are looking at plus JPY1.5 billion.
Finally, labor costs. This will increase in scale, but we expect an increase, especially in the European region,
etc.

Please continue on to page seven. This is the sales by region.
Around the middle are the results for Q1, and then the forecast for Q2 and beyond.
Since we have changed the sales figure to JPY825 billion this time, I will mainly explain the comparison withthe previous announcement.
Please look at column 2-1 that says excluding foreign exchange. As you can see, it is JPY8 billion in Asia andothers. It has been greatly impacted by the decrease in China, as I mentioned, which was about JPY12 billion.
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Then, the next page, page eight, shows sales and operating income by business type.
The upper row shows net sales, and the lower row shows operating profit.
The sales by business type in Q1 were JPY35.5 in the aftermarket business, JPY32.9 billion in the industrial
machinery business, and JPY132.4 billion in the automotive business.
If you look at column 2-1, which says excluding exchange rate, on the right, the scale of the industrial
machinery business decreased.
The operating income below is JPY4.8 billion for the aftermarket business, JPY0.9 billion for the industrial
machinery business, and JPY minus 4.1 billion for the automotive business.
In terms of the changes YoY, profit increased by JPY0.2 billion in the aftermarket business, but the effect of
the bad debt provision for Horimasa, which I have already mentioned, is around JPY350 million each for theaftermarket and industrial machinery businesses. Excluding that, the profit in the aftermarket businessincreased by about JPY550 million. As for the industrial machinery business, the scale is smaller, but it is almoston the same level as the previous fiscal year.

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9Next, please turn to page nine. This is the quarterly change in performance by business type that I explained
earlier.
On the left is a bar graph of net sales, and on the right is a bar graph of operating income and a line graph ofoperating margin.
First, the aftermarket business is the top line, and it has dropped from 18.7% in Q4 to 13.5%. This is due tothe impact of the credit loss mentioned earlier, which was a negative 1 percentage point, and the impact of
the scale effect and regional composition, especially the Americas, where profit margins are high, which
decreased compared to Q4, which had a negative 2 percentage points impact.
The industrial machinery business is also affected by Horimasa by 1 percentage point, and then by the scale
by about 2 percentage points.
On the other hand, the profit margin for the automobile business deteriorated by more than 1 percentage
point in terms of selling prices compared to Q4 due to the fact that the processing of selling price hikes wasconcentrated in September and March in particular. The current situation has deteriorated by about 2
percentage points due to an increase in fixed costs and other factors.

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10Pages 10 through 11 show sales and operating income by location.
Page 10 shows Japan and the Americas.
The upper row shows net sales, and the lower row shows operating income.
As for Japan, the sales volume has dropped since Q4, and the operating profit margin has dropped from 3.3%
to 1.8%. The main component of this is the allowance for doubtful accounts, which I mentioned earlier, which
is about JPY700 million. Also, there is a JPY1.1 billion rebound from the price increase in March. As a result,the profit margin is down compared to Q4.
In the Americas, on the right, the selling price was affected by the same factors, although in a smaller amount,and the fixed costs also had a negative impact, falling to minus 3 percentage points on page 10.

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11Page 11 shows the same graph for Europe and the rest of Asia.
As for Europe, even when the exchange rate is considered, the volume of goods is down compared to Q4. Thishas had the greatest impact.
In Asia and other regions, there was a slight decrease in the volume of goods sold, and this had a negative
impact on the operating profit margin, which was slightly lower than in Q4.

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Continuing on to page 12, the status of inventories.
At the end of this past June, the actual result was JPY255 billion. The increase was JPY15.6 billion from March,but since there was a JPY13.7 billion impact from the foreign exchange rate, the increase was JPY1.9 billion involume.
The forecast for FY2024 is JPY230 billion. This is an increase of JPY10 billion from the previous JPY220 billion.
This is not due to the volume but to the effect of foreign exchange rates, which have increased by JPY10 billion
since the last time.

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Continuing on to page 13, the changes in capital expenditures and depreciation.
In this Q1, capital investment was JPY4.4 billion, and depreciation was JPY10.3 billion.
The forecast for the full year is JPY28 billion for CapEx and JPY41 billion for depreciation. This has not changed,
and we are staying on this line for now.

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Continuing on to page 14, the status of interest-bearing debt.
Interest-bearing debt at the end of June was JPY370.9 billion. Net interest-bearing debt was JPY253.7 billion,
and the net D/E ratio was 1.1.
The decrease was JPY0.4 billion compared to the end of March, but there was an increase of JPY6.3 billion
due to the foreign exchange rates. Therefore, excluding the impact of foreign exchange, we have achieved asteady reduction of minus JPY6.7 billion.
We have also increased our forecast for the fiscal year ending March 31, 2024, from JPY350 billion to JPY355
billion, but this is again only because we have seen a JPY5 billion impact of foreign exchange rates overseas,
and there is no substantive change from the previous forecast.

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Then, on page 15 is the cash flow situation.
In Q1, operating cash flow was JPY16.8 billion, and free cash flow was JPY12.1 billion as a result of reducing
investment cash flow.
The forecast for the full year is shown on the far right, and we are forecasting an operating cash flow of JPY60
billion and a free cash flow of JPY29 billion, so we believe that cash flow will also be favorable.

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Continuing on to page 16, Mr. Miyazawa will explain.
Miyazawa: My name is Miyazawa. I would like to explain the outlook for the overall sales of the automotive
business and operating income for the current fiscal year.
As I mentioned at the financial briefing for the previous fiscal year in May, we posted an operating loss of
JPY12.4 billion last fiscal year, and our primary mission for the current fiscal year is to return to the black.
Three major pillars are currently underway to achieve these results.
The first is to strengthen price revision activities. There are two major ones.
The first one is a price increase and withdrawal of unprofitable business. Negotiations on this issue have beenongoing since last fiscal year, and we are aiming for an early settlement of this issue, which is being developed
globally.
Last year, we were not able to start the process we had hoped for, especially with European manufacturers,
so we are trying to achieve solid results by escalating negotiations at an early stage. Our main targets are
European manufacturers.
The second one is procurement reform. In particular, focusing on the US, the rise in the cost of materials,
including labor costs, has been much higher than in other regions, so we are shifting from the traditional policyof satisfying local content to procurement outside the region, particularly from South Korea and India. We are
currently working to ensure that this will produce results in H2 onwards.
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In the US, some of our customers have requested an increase in volume, and we are considering shippingfrom Japan or China for the overflow of capacity in the US. In particular, we are trying to ensure that shipmentsfrom Japan will be able to take advantage of the current exchange rate environment.
Last but not least, it is the improvement of MIX.
As I have explained in various ways, I have been saying for some time that we should shift to large vehicles
and promote a shift to so-called high-profit businesses, and this is expected to come to fruition in this fiscal
year.
As I explained in the previous report, we have been undertaking 100% in-house production of the constantvelocity joint business in Japan, and full-scale mass production of this business will start in H2.
We expect operating income minus JPY6 billion in H1. For H2, we are currently aiming to achieve a solid
turnaround to black figures for the full year, which currently stands at about JPY1 billion in operating income,after taking into account the revision of selling prices in particular and the improvement of MIX.
That is all from me.

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Question & Answer

Nagao [M]: Now, we will have time for questions and answers. During the Q&A session, the secretariat will
select the persons with questions.
First, Mr. Sasaki from Mitsubishi UFJ Morgan Stanley Securities.
Sasaki [Q]: My name is Sasaki from Mitsubishi UFJ. Thank you. I would like you to briefly answer threequestions for me.
First of all, I would like to ask about Mr. Miyazawa's earlier presentation. As you say, if NTN's turnaround in
the automobiles business progresses through these initiatives, I believe that it will happen finally, but on theother hand, you have been struggling quite a bit with your automotive initiatives, so I think that many
investors are probably wondering if this is really going to progress.
So, let me ask you straight out, what is your level of confidence in achieving the level of the automobile planon page 16? Also, since you have been struggling in the past, I would like to know what you think is thedifference between this time and the past, such as your level of confidence and what is different.
Thank you.
Miyazawa [A]: I would like to explain a little about the question. Of course, there are risks in the future, risksof various changes in the future, and risks of changes in the economic environment, but at this point, I am
confident that we will achieve this plan with a high degree of certainty because we are continuing to negotiatewith European manufacturers, in particular, on projects that have been left over from the previous year, andwe are now at a critical stage.
In addition, as a reflection of last fiscal year, we were unable to achieve the final target because negotiations
were escalated at a very late stage, close to the end of the fiscal year, and we are proceeding with anescalation of negotiations at a much earlier stage for this fiscal year. Of course, the negotiations are notnecessarily progressing as we had hoped, but we are determined to bring them to success.
Also, regarding the change in MIX, the partnership business is a highly profitable business for us, as I
mentioned earlier, and we are quite confident that it will definitely start up mass production in H2. We expectthat this will enable us to improve profits in H2.
That is all from me.
Sasaki [Q]: Thank you very much.
I venture to ask, but from your point of view, Mr. Miyazawa, is there anything you perceive as a risk to yourachievement? Would you be willing to share it with us?
Miyazawa [A]: One factor is the recession in China or the reduction in car production. Unfortunately, in ourcase, about 65% of our automotive business in China is for Japanese-affiliated companies. As you know,
Japanese-affiliated companies are struggling greatly due to the lack of electric vehicle lineups, and this has
had a large-scale impact on us in H1.
We do not expect any major changes in H2, so we have factored in some of the negatives. However, if
Japanese automakers reduce production in China more than we expect, we consider that to be a major risk.
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19That's all from me.
Sasaki [Q]: I understand very well. Thank you very much.
Second, on slide number five, what is the concept of the increase and decrease factors for the new plan? I
understand that the impact of the scale has been lowered due to the impact of Chinese EVs, as Mr. Miyazawa
just mentioned, but since the impact of scale has been reduced to a certain extent in addition to that, pleasetell us where in the scale has it been lowered compared to the previous plan.
Also, the proportional costs and selling price are considerably higher than in the previous plan, but this is not
something that you can control, but rather something that is determined by the other party. Could you give
us a little more background on why the proportional costs and the selling price will really improve?
Thank you.
Yamamoto [M]: First of all, about the scale, is it correct that you are asking how much the volume was reducedin each region?
Sasaki [Q]: Yes, please. If possible, please let us know the figures by business and region.
Yamamoto [A]: Okay. First, the sales volume of the automotive business dropped by JPY10.9 billion. The
breakdown is, as I mentioned earlier, sales volume decreased by JPY11.6 billion in China, and the big fall wasin Europe, which was a sales volume of JPY5.2 billion. On the other hand, it is increasing in the US by JPY3
billion. Plus, JPY2.7 billion in ASEAN countries. Also, in Japan, although it's like a fraction, it's a plus of JPY0.3
billion. The total is JPY10.9 billion.
Is this OK for the automobile business?
Sasaki [M]: Yes.
Yamamoto [A]: As for the industrial machinery business, it was reduced in all regions. As for the amount ofmoney decreased, the total is JPY6.8 billion on a physical quantity basis. The largest portion is JPY2.7 in Japan,
JPY2.4 in the US, and the rest is the equal amount of 1/3 each in Europe, Asia, and China.
Is this enough for the industrial machinery business?
Sasaki [Q]: For the industrial machinery business, what specific industries did you reduce your products?
Ukai [A]: I will answer.
For example, in Japan, machine tools and construction machinery manufacturers, such as Komatsu and Hitachi
Construction Machinery, have achieved quite high results, but in reality, we are struggling a bit with our salesof bearings.
As for the Americas, especially the agricultural machinery, Deere and other areas with fairly high-profit
margins are now falling in this region. Then, Caterpillar is also down quite a bit. Caterpillar's own results werehigh today, but we have a 50/50 ratio between OEM and maintenance, and the drop in maintenance issignificant.
So, to a large extent, the drops in Japan and the Americas have been large in such industries.
That's all from me.

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Sasaki [Q]: Thank you very much.
How about the aftermarket business?
Yamamoto [A]: It dropped in Japan and in the US. It dropped by a little over JPY3 billion in Japan and about
JPY0.6 billion in the US, and it is increasing in Europe and Asia by about half each. The total is around to beminus JPY1.6 billion.
Is this enough for sales?
Sasaki [Q]: Yes. I'm sorry that this is getting a bit long, but for construction equipment, are you saying thatinventory adjustments are still having an impact on your company? The sales of each company itself are strong.
Ukai [A]: Domestic aftermarket has been deteriorating markedly, and this started to happen around the endof the last fiscal year. Not enough information is available on whether this is an obvious stock adjustment.
However, the Japanese aftermarket industry has been the most affected. Also, China's future is still a bit
unpredictable. It varies considerably from month to month.
Sasaki [Q]: Thank you very much.
Sorry, this is getting a bit long, so I'll end with this one, but how certain are you about these JPY1.7 billion and
JPY1.2 billion as proportional costs and selling price? I'm referring to the comparison with the existing plan on
page five.
Yamamoto [A]: The selling price is almost the same as that of the automotive business. As Miyazawa
explained earlier, regarding proportional expenses, as was the case in Q1, there is still a part of the current
amount that is settling down. Since the amount of JPY1.7 billion incorporates this, it is difficult to imagine
another sharp rise in the cost of raw materials, so we are fairly certain that this is the case.
Is that all?
Sasaki [M]: Yes, I understand very well. Thank you very much.
Nagao [M]: Thank you very much, Mr. Sasaki.
Now, Mr. Isayama of Goldman Sachs Securities, please continue with your question.
Isayama [Q]: Thank you. My name is Isayama of Goldman Sachs Japan. Thank you.
First question, as is customary, may I ask you to break down the analysis of increase and decrease by thefactor on page four for each project? You have given us a detailed explanation, but it would be helpful if you
could provide the details of each business.
Thank you.
Yamamoto [M]: You said it's page four, so that means the YoY comparison by business?
Isayama [M]: Yes.
Nagao [M]: Now, the secretariat will answer.
Koge [A]: I am the secretariat, Koge, and I will answer.

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The first is about the aftermarket business. In the aftermarket business, the sales income increased by JPY0.2
billion YoY. By factor, the scale effect is negative JPY700 million, foreign exchange rates are positive JPY900
million, selling price level is positive JPY1.3 billion, proportional costs are negative JPY900 million, and fixed
costs are negative JPY500 million, of which personnel costs are negative JPY200 million.
Next, let's look at the industrial machinery business. This was a negative JPY0.4 billion YoY. The breakdown is
as follows: scale effect is negative JPY1.3 billion, foreign exchange rate effect is positive JPY0.8 billion, selling
price level is positive JPY1.4 billion, proportional costs are negative JPY1.1 billion, and fixed costs are negative
JPY200 million, of which personnel costs are negative JPY200 million.
Continuing on, let's look at the automotive business. In the automobile business, it increased by JPY2.5 billion
to the previous year's figure. The breakdown is as follows: scale effect is positive JPY0.8 billion, foreignexchange effect is positive JPY1.2 billion, selling price level is positive JPY5 billion, proportional costs arenegative JPY4.2 billion, and fixed costs are negative JPY0.2 billion, of which personnel costs are negative JPY0.6
billion.
That's all for me.
Isayama [Q]: Thank you.
Moving on to my second question. I'm sorry, I'm having a bit of trouble judging this, but how does theoperating income of a little over JPY2 billion when you add back the Horimasa's JPY700 million that you justmentioned compare to the Q1 results that you had projected at the beginning of the term?
I would like to ask about the strengths and weaknesses of each business. I somehow got the impression thatthe automotive business was in line with it, but perhaps the industrial machinery business and such were a
bit weak.
Yamamoto [A]: Okay, I will answer.
As you mentioned, the impact is still that even in Q1, the scale of the project was smaller than expected. In
other words, the scale of the industrial machinery business was smaller than expected, and I think this affected
the lower profit.
As I explained earlier, other areas, such as management of fixed costs, progress in raising prices, original costs,
and proportional costs, are almost in line with expectations. In Q1, the impact of the scale of operations on
the industrial machinery business and the automotive business was more prominent than expected.
Is this okay?
Isayama [Q]: Thank you. This is my last question.
In the industrial machinery business, although I was actually worried about the automotive business, basedon what you just said, it is still the industrial machinery area that is falling, and I'd like to know the backgroundof it.
I'm sorry, President Ukai, but in your earlier exchange with Mr. Sasaki, I think you answered about theaftermarket business in terms of inventory, and I think you mentioned that for the industrial machinery
business, such as CAT, inventory adjustments are made, or orders to your company are stopped due to theirinventory on hand or something like that.

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22You said that for the past year or two, there have been no such signs at all. Is the reason why their performanceis good but your company's orders have stopped because your customers, the construction and agricultural
machinery manufacturers, are no longer under pressure because their bearing inventory is much higher, andas a result, sales have fallen?
The momentum of construction and agricultural machinery that you have separately shared looks pretty bad,so I wonder if you could comment once again on this, not on the aftermarket business, but on the growth rateof the industrial machinery business by industry, especially on construction and agricultural machinery, which
seemed to have become tougher.
Thank you.
Ukai [A]: Yes. First of all, agricultural machinery, for which market demand has, first of all, declined. There arevarious reasons for this, including the social and political situation in Europe, which started in Ukraine, andthe abnormal weather conditions. In the case of agricultural machinery, the number of parts supplied directly
to the production line has been declining due to the decrease in production.
As for Caterpillar, their demand for maintenance parts have been declining.I am not sure if I am answering
your question directly, but that is the situation we are currently facing.
Isayama [Q]: Thank you.
Just one thing, but did it suddenly happen during this quarter? Or did you already see a few signs since yourannouncement at the beginning of the term, which gradually and progressively worsened? I want you toanswer my last question and tell us whether the event was sudden or gradual and visible.
Ukai [A]: I am aware that there were signs. Therefore, we began to see such signs toward the end of the last
fiscal year, and I think they are clearing up now. The same is true of machine tools. Since the end of the last
fiscal year, some machine tool manufacturers have been saying that the situation is becoming more difficult,and I believe that this situation is becoming more pronounced now, especially among domestic machine tool
manufacturers.
Isayama [M]: I understand very well. Thank you very much.
Nagao [M]: Thank you very much, Mr. Isayama.
Thank you very much for your patience, Mr. Sano of JPMorgan Securities. Please ask your questions.
Sano [Q]: Thank you. I am Sano from JPMorgan Securities. Thank you.
My first question is: how much sales and operating income in Q1 were up or down from the initial plan inquantitative terms?
Thank you.
Yamamoto [A]: We did not originally disclose it in Q1, so I will give you a rough explanation, but I think thevolume of sales fell by a little less than JPY10 billion. Including the impact of the volume, operating income is
now JPY1.5 billion, but I estimate that it has dropped by JPY3 billion to JPY4 billion. This includes JPY700 million
from Horimasa's bad debts, which is the current situation.
Is this okay?
Sano [Q]: Yes. Thank you, Mr. Yamamoto.
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The second question is about the profit margin on aftermarket in Q1, which is roughly 14.4% if we go back to
the aftermarket profit, which is half of Horimasa's bad debts that you just mentioned. I think it's a highsituation, not so different from the previous year's Q1, but last year in Q4, or in Q2 and Q3, I think last year in
Q4, we had a similar level of sales, almost 59%.
Is it correct to think that this is a matter of seasonality and that from Q1 onwards, from Q2, this quarterly
number for the aftermarket business sales will recover quite steadily?
Thank you.
Yamamoto [A]: First of all, the profit margin for aftermarket was quite high in Q4 in the previous year. So, if
we return Horimasa's figure this time, it is about the same as Q1 of the previous year.
And you wondered if the recovery would be the same from here on out. Is this what your question is about?
Sano [M]: Yes.
Yamamoto [A]: Yes. First, as I mentioned earlier, the difference between Q4 of the previous fiscal year andthe current fiscal year is due to the impact of Horimasa and a decrease in the scale of aftermarket products,
which are manufactured at the same plant as the industrial machinery business. That is the main reason why
they are falling. As you mentioned, we expect that Q2 will see a recovery from the current rate and that H2
will be back to Q3, to Q4 of the previous year.
Sano [Q]: I understand. Thank you, Mr. Yamamoto.
One last question, which I would like to ask President Ukai or Mr. Miyazawa, is about page 16 about improving
MIX and shifting to a particularly high-profit business in the automobile business. I think it is true that fromQ4 and Q1, the prospects for Japanese manufacturers' EV business in China, which you mentioned earlier as
a risk, have become increasingly uncertain.
How do you feel about the risks here in the last three or six months? And if you think that this is likely tocontinue, how have you been accelerating your efforts to improve MIX in the last three months or so while
minimizing that part of the risk? It would be very helpful if you could give us some kind of temperature or asense of the scene in this area.
Thank you.
Miyazawa [A]: This is Miyazawa. I would like to answer your question.
Indeed, as I mentioned earlier, more than 65% of our Chinese automotive business is with Japanesemanufacturers, so production cuts there have had a very large impact on our Chinese business. Looking at H1
alone, the volume of goods sold was about 30% less than we had originally planned at the beginning of the
fiscal year. Most of the impact is on Japanese-affiliated manufacturers, and for H2, the current plan is basedon the expectation of a reduction of nearly 20% from what was planned at the beginning of the fiscal year.
Of course, car manufacturers, including Japanese car manufacturers, have announced various plans forrecovery in H2, but we are not sure how much we can count on them, and we are expecting a certain level ofcertainty.
As I mentioned earlier, as for MIX, as I explained earlier, we have been able to fully satisfy the automobile
manufacturers in Japan with CV joints manufactured in-house, and mass production has started this fiscal

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24year. We are in a very advantageous position in this regard, and we believe that MIX will certainly improve inthis sense.
I hope this answers your question.
Sano [M]: I understand. Thank you. That's all from me.
Nagao [M]: Thank you very much, Mr. Sano.
Now, last but not least, Mr. Tai from Daiwa Securities, please ask your questions.
Tai [Q]: Please excuse me. I would like to squeeze in one last question. This overlaps with the earlier exchange.
When compared to the previous year's Q4 QoQ, sales were almost the same, but profits were significantly
lower. However, as you mentioned, from the plan at the beginning of the term, the profit in Q4 last year wasa little over JPY7 billion, and in Q1 this time, it was JPY1.5 billion.
I think that means that in Q1, we were looking at a budget of around JPY3 billion or JPY4 billion from the
beginning of the term. Compared to Q3 of last year, sales in the previous Q3 were just about JPY200 billion,
which is almost the same, but there was a profit of about JPY6 billion at that time. Then, even if this year's Q1budget were JPY3 billion or JPY4 billion, it would still be lower than then.
I think it would be nice to see the effects of some more effort being made, but what are the factors that are
still so much in place that are spoiling or canceling it out? For example, you mentioned that shipping andmaterial costs are decreasing and that price hikes will gradually take effect and will be topped up, but evenso, compared to Q3 of last year, there is no change at all. Is this due to the impact of MIX due to the decreasein China, or is it because the cost of electricity has gone up so much?
If I'm missing something, please tell me. I was wondering if you could give us a quick summary of all NTN's
businesses rather than a breakdown by business.
Ukai [A]: Thank you very much. I'm Ukai.
In terms of your current question, the biggest impact is still that the Chinese market, not only for automobiles,
but also for industrial machinery and then aftermarket, is selling considerably less than expected, which I thinkhas the biggest impact.
There are many areas where we cannot do anything about it through our own efforts and thoughtfulness. We
are working day and night on how to improve our earning power. So, as Mr. Tai just mentioned, we did quite
a bit of analysis as to why Q4 and Q1 were so much lower.
There have been some external disturbances, such as the Horimasa incident I mentioned earlier, but there
have been new cost increases in some areas, such as labor costs and electric and gas costs, and although costs
for steel materials have subsided considerably, there is still a global trend of cost increases. However, the cost
increase is still continuing on a global scale, and the transfer of the cost increase to prices is still lagging behind.
Therefore, it is also important to see how we can recover and reap the benefits of this in this period. In the
final Q4, which we are reporting on today, we must, first of all, manage the Company in such a way that we
can achieve these figures as a minimum.
Does that answer your question?
Tai [Q]: Yes. Thank you very much.
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25However, no one knows what will happen in China, but there is an increasing number of pessimistic voices
about the future, and even if they do start to move forward, there is an increasing number of people who saythat the momentum of the past will no longer be as strong. I think the Chinese bearing manufacturers are theones who are suffering the most, and I think the situation where we have to fight with these people is going
to increase more and more. I understand very well that it is difficult in China, but I wonder if we are startingto need a new mindset to overcome that.
So, I'm sorry. I understand the question and what you are saying, but I would like to hear one more word. That
was my impression.
Ukai [A]: In fact, there are various automobile specifications tailored to the Chinese market. As a global
manufacturer, we have produced common global specifications. However, as we conducted various surveys
for each market, we came to understand the level of technology required in each market.
In particular, with regard to CVJ(constant velocity joint) and hubs for EVs now being sold in China, Japanesemanufacturers, premium brands, European manufacturers, and American manufacturers were all saying thesame thing, and at first, we thought that high-specification products for EVs were absolutely necessary. But,in fact, what Chinese EV manufacturers are doing now is using conventional components that can be madecheaply and putting them on the market.
So, as Mr. Tai mentioned, we need to fundamentally review our cost structure and specifications to ensurethat we can sell our products at the appropriate price required by the market, and we need to review thespecifications themselves. We are also working on these areas.
As Miyazawa explained earlier on page 16, the biggest impact is to ensure that we increase the profit margin
in a market where we sell more than JPY500 billion.
I believe that the first step in building a solid foundation is to proceed with the activities that I am reportingon today so that we can steadily reap the benefits of our efforts.
That is all.
Tai [M]: Thank you very much. Thank you. I'm looking forward to seeing the next result.
Nagao [M]: Thank you very much, Mr. Tai.
We sincerely apologize for being late due to a system malfunction at the beginning of this presentation, andthe time has passed the scheduled time of 6:00 PM, so I would like to conclude the IR presentation of NTN
Corporation for Q1 of the fiscal year ending March 31, 2024.
Thank you very much for joining us today.
[END]______________
Document Notes
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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.
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